One of the best ways to generate passive income is with some of the most undervalued real estate investment trusts (REITs). Not only do these undervalued REIT stocks offer attractive growth, and diversification relative to other assets, but they also have attractive yields.
Look at Realty Income (NYSE:O), for example. Also known as The Monthly Dividend Company, it currently yields 5.57%, and just announced a dividend of $0.257 per share ($3.084 annualized) and is payable on May 15, 2024 to stockholders of record as of May 1, 2024.
With that one REIT, your money just made you more money. And all you had to do was hold the stock. Making undervalued REIT stocks even more attractive, they’re interest-rate sensitive, which means they tend to do better when interest rates pull back.
With higher hopes for interest rate cuts from the Federal Reserve, we could soon see greater interest for REIT investments.
With that, here are some of the most undervalued REIT stocks you may want to own today.
Agree Realty (ADC)
With a yield of 5.12%, rebounding shares of Agree Realty (NYSE:ADC) are attractive. Last trading at $58.56, I’d like to see ADC retest $66 initially. In addition, the omni-channel retail REIT just raised its monthly dividend to $0.25, a 12% month over month increase. It’s also payable on May 14 to shareholders of record as of April 30.
Better, the REIT just reported funds from operations (FFO) of $1.01, which beat by a penny. Revenue of $149.45 million, up 18% year over year, exceeding expectations by $1.09 million. As of March 31, ADC owned 2,161 properties in 49 states, with about 44.9 million square feet of leasable area.
According to Agree Realty’s CEO, Joey Agree, “With total liquidity of over $920 million, more than $385 million of hedged capital and no material debt maturities until 2028, we enjoy ample balance sheet flexibility to execute our disciplined operating strategy. Our best-in-class portfolio and fortress balance sheet provide us with conviction that we can achieve 2024 AFFO per share between $4.10 and $4.13 without deviating from our core strategy or moving up the risk curve.”
Iron Mountain (IRM)
We can also look at Iron Mountain (NYSE:IRM), which currently yields 3.42%.
The REIT is aggressively expanding its data center capacity to meet the demand of the generative artificial intelligence (AI) boom. This makes it attractive, especially on a recent slight pullback. Making it even more attractive, IRM just declared a 65-cent dividend that’s payable on July 5 to shareholders of record as of June 17.
Earnings have also been solid. In its first quarter, funds from operations came in at $1.10, which beat by 18 cents. Revenue of $1.48 billion, up 12% year over year, beat by $30 million.
Analysts at Wells Fargo recently raised their price target on IRM to $90 from $80, with an overweight rating. “The firm believes Iron Mountain can sustain 10%-12% total shareholder return in the coming years, toward the high end of REITs,” added TheFly.com. Barclays also raised its price target on IRM to $91, with an overweight rating.
Data Center & Digital Infrastructure ETF (DTCR)
Or, if you want to diversify with data center REITs, there’s the Data Center & Digital Infrastructure ETF (NASDAQ:DTCR).
DTCR last traded at $14.35 a share. While this ETF only yields about 1.11%, I favor it because of its diversification with top data center stocks set for substantial growth in a digital world. With an expense ratio of 0.50%, the ETF holds 25 related stocks, including, Equinix (NASDAQ:EQIX), American Tower (NYSE:AMT), Crown Castle (NYSE:CCI), Digital Realty Trust (NYSE:DLR), and Digital Bridge (NYSE:DBRG).
All of which should benefit with global data center investments “expected to increase from $321bn in 2022 to $410bn in 2025 to support the growth of 5G, smart grids, and other forms of tech-based infrastructure,” says Global X ETFs.
Since bottoming out at around $13.80, it’s now up to $14.34. From here, with data center growth only expected to explode, I’d like to see it closer to $25 near term.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.